VTKLY VTech Holdings Ltd (PK)

HONG KONG—Investors pulled nearly $300 million out of an Asian stock fund co-run by veteran investor Mark Mobius last month, extending a dramatic exodus from a fund that was for years the biggest of its kind in Asia.

The outflow, equivalent to more than 5% of Templeton Asian Growth fund's $5 billion in assets at the start of the month, outpaced withdrawals from other big stock funds in the region as volatility shook global markets, according to data provided by Morningstar Inc.

The latest​losses follow a dismal 2015 during which investors pulled an estimated $4.5 billion out of the fund, contributing to a more than halving of its assets under management, according to Morningstar estimates. In December, the research firm placed a negative rating​on Asian Growth, ​the first time it has been rated as such in its nearly 25-year history.

"We have lost our conviction in the fund," the firm said in a Dec. 20 report. "Ineffective and inconsistent execution of the investment process has cost investors."

Slower growth in China and the U.S. Federal Reserve's pivot away from years of near-zero interest rates have put a damper on riskier emerging market investments. Stock markets across the region have suffered a poor start to 2016, with a broad benchmark of Asian shares down nearly 12% so far. ​

Asian Growth in particular has struggled mightily. The fund, which focuses on stocks that look cheap relative to their growth prospects, posted three times the loss of the MSCI All Country Asia excluding Japan stock index last year.

A bullish outlook on oil prices also has left the fund with a big chunk of its assets in energy companies. Such investments made up a quarter of the fund at the end of January, or more than five times the weight of such companies in the MSCI index. But the continuing slump in global oil markets has weighed heavily on stocks such as Pakistani oil producer Oil and Gas Development Co., in which Asian Growth holds​a substantial stake.

Its total assets under management were $4.5 billion at the end of January, a sharp downturn for a fund that at the end of 2012 managed more than $16 billion.

​"Whilst heightened market volatility can be unsettling, our investment process looks beyond the short term and aims to find and invest in well-managed growth leaders at attractive valuations across Asia," a spokeswoman​for the firm said.

She pointed to the fund's relatively stronger performance amid January's market turbulence, which saw it post a 4.4% decline versus a 7.7% drop for the MSCI benchmark.

Mr. Mobius, an energetic promoter of emerging-market investing over his more-than-40-year career, has played less of an active role in day-to-day investing at the firm, ceding those duties to co-managers such as Asian Growth's Allan Lam. Morningstar was sharply critical of Mr. Lam in its report.

"Our conviction in him has significantly worsened," Morningstar analyst Germaine Share said in an interview this month. "We don't think he's taken any action to improve performance and deliver for investors."

Ms. Share said Morningstar also is concerned the pressure of rising redemptions from the fund has forced Mr. Lam to sell some of his top bets.

​​The fund's biggest holding, auto maker Brilliance China Automotive Holdings, accounted for 7.7% of the fund at the end of January, down from 9.1% at the end of 2015, according to information provided on Templeton's website.

VTech Holdings Ltd., a Hong Kong maker of digital-learning toys and cordless phones that accounted for 3.4% of the fund at the end of 2015, was no longer listed among its top holdings.

Write to Mia Lamar at mia.lamar@wsj.com

(END) Dow Jones Newswires

February 11, 2016 08:15 ET (13:15 GMT)

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